Lady Butterfly's journey to financial independence

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retirement

Happy belated New Year! With an infant, a demanding full time job, volunteering work and catching up with friends, life doesn’t get any busier than this. Personal finance and FIRE is my passion so I will make time for it no matter what. This blog is my hobby and I am not trying to make money out of it (yet), so sometimes my posts will just be a little late. Better late than never.

I had four short-term financial goals at the beginning of 2017. Lets go over each one of them and see how I did.

Goal 1: Increase total passive income to at least $600 average per month or $7,200 per year (Include dividends, interests, and rental property)

I gave myself an A on this goal. I increased my average passive monthly income to over $835. I sold real estate rental at the beginning of the year, so there was minimum loss in passive income this year. I am very proud that my annual passive income broke the 10K mark.

It’s tax season and this is a good time to review how my retirement accounts performed last year. I have a 401k (traditional and Roth) plan through my current company, a rollover traditional IRA from my previous company and a Roth IRA that I opened over a decade ago on my own.

Lets do a quick review of my 5-Yr Plan to FI/RE targeting April 15, 2020. It has only been a month and I am still working on the details of each step. I track my income, expenses and net worth on a regular basis so it’s easy for me to know how well I am progressing toward my goal in any given month. Continue reading →

The first step of my five year plan to FI/RE is to pay off my primary home mortgage or have the means to pay it off. What I mean is that I am planning a two part process. Part One is to continue to pay additional principal until I reach $40K of principal at the end of five years, or before that. Part two is to invest in a Muni-Bond every month until I reached $40K at the end of five years, or before that, to cover the rest of the principal.

The loan amount on my primary home after the last refinance is $120K with a 3% fixed interest rate and a 15-year loan term. I have already paid off more than a quarter in the last few years since the refinance, and the current loan amount is a little shy of $85K. Since my internal target is October 15, 2020, that leaves me about 53 months to pay off $45K. What that means is that I need to pay off $850 in principal each month. Currently the principal portion of my monthly payment is about $615, so I would have to pay additional $235 per month. Currently I am paying $300 additional principal per month so Part One of this step is covered. Ideally, I would like to complete this step by March 15 of 2019 ,so I will increase my monthly payment by about $675 instead.

Part Two is to invest in a Muni Bond until I reached $40K on October 15, 2020. The exact breakdown is $755 a month for the next 53 months. The reason I am doing this is that when my mortgage reaches $40K in principal, the interest portion will be less than one hundred dollars per month, and the interest on the Muni Bond will earn more than enough to cover the mortgage interest. At that time I will be free of my mortgage. I have the option to pay it off, or not, depending on the Muni Bond interest. When that happens I wouldn’t mind riding the rest of the loan to term, knowing that I have the money to pay it off, if necessary. It makes more financial sense if I keep the money in Muni Bonds to earn interest, and have an extra cushion of liquid asset in case of emergencies.

For the last month I have been thinking long and hard about my life. I have blogged about not having a work-life balance and I foresee things will only get worse in the future. I have been working in the same high tech job for the last seventeen years, which is extremely rare this day and age. I started off as an associate software engineer and got promoted up the ranks to principal engineer, then I switched to management when my old boss asked me to. That was probably my biggest mistake. I wonder if I would be happier had I turn that opportunity down.

I am an introvert and the baby in the family, I don’t like dealing with people or having any kind of responsibilities. Taking up this job means I have to real with lots of people and take on lots of responsibilities. My life’s mission was always about having fun. For most people, it’s a nice challenge, but for me, it’s constant torture. Maybe it was okay for the first couple of years, but these days I don’t even want to get out of bed to get to work. I also sacrificed a lot in my personal life in the last eight years to have this position, and I don’t think it’s worth it. The pay is not much better but the stress level is more than doubled.

The cost of living in the SF Bay Area is expensive and I have no plans to live anywhere else at this moment. I grew up here and this is my home. Financially, I am not ready to retire in this area. I can’t afford it yet. I am single and I live by myself, so there is no one to share my expenses. Someday my boyfriend and I plan to live together, but with our demanding and stressful jobs, it’s probably not the best thing for us at this moment. We both need a lot of alone time and space to de-stress.

When I started this site a few years ago, I thought fifty-five is a good age to retire. But with the demands of this job or any tech job in this valley, I will not survive that long. I think five more years in tech is the most I can handle. This is a reasonable amount of time for me to build my net worth, increase my passive income and decrease my expenses(pay off mortgage or have the means to pay off mortgage).

Today I am declaring my financial independence and early retirement target date to five years from now, or to be exact, April 15th of 2021. Every project comes with risks, so as the project manager of my FI/RE project, I will need some sort of a mitigation plan. I think a more aggressive FI/RE target date of October 15th, 2020 might be achievable, but that means I really need to push myself. To give myself a little wiggle room, I am setting the date as April 15th, 2021, but the internal date I am tracking for myself is actually October 15th of 2020. I am still working on the details of my plan and I will share before April 15th.

I have been contributing to my retirement accounts since I started working after college. The first company I worked for does not have a 401k match, so I only contributed about 5-8% of my starting salary. After my company was bought, the new company provided a 50% match up to the first 6% of my salary. From that point on I have contributed the maximum into my 401k. The new company gave me two options for my old 401k, to withdraw all the money from the account or convert it to a Traditional IRA. I chose to convert the old 401k to a Traditional IRA.